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Bitcoin Funding Rate Remains Positive, More Decline Soon?

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On-chain data shows that the Bitcoin funding rate is still at a relatively high positive value, suggesting that the cryptocurrency could experience further declines in the near future.

The Bitcoin funding rate has been positive for the past few days

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As a CryptoQuant analyst points out mailthe current funding rate suggests that the price is now in a fresh decline.

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The “Funding Rate” is a metric that measures the recurring fee that traders in the Bitcoin futures market have to pay each other.

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When this metric is above zero, it means that long traders are currently paying a premium to short traders to keep their positions. Such values ​​indicate that at the moment the market is dominated by bullish sentiment.

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On the other hand, negative readings of the indicator mean that the majority is now bearish as short positions are currently being paid long.

Now here is a chart that shows the trend of Bitcoin funding rates over the past six months:

Bitcoin recharge rate

The value of the metric seems to have been positive in the past week | Source: CryptoQuant

As you can see in the chart above, whenever the Bitcoin Funding Rate has reached a relatively high positive value over the past few months, the price of the cryptocurrency has usually declined shortly thereafter. Similarly, negative spikes have led to some uptrend in BTC value.

Here’s what’s going on here: high positive readings mean that the market is accumulating long positions. Thus, a sufficiently large sudden decline could liquidate many of them, which could eventually cause the price to fall further and thus liquidate even more long positions. Such an event, in which a cascading merger of liquidations occurs, is called a “squeeze” (or, in this case, a long-term squeeze).

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A few days ago, when the price of the cryptocurrency was above $23k, the funding rate peaked again and the price subsequently went down. However, the current value of the indicator still looks quite positive, which may mean that the decline is still ongoing.

Bitcoin Price

At the time of writing, the price of Bitcoin is hovering around $22.7K, up 6% from the last seven days. Over the past month, the cryptocurrency has added 8% in price.

The chart below shows the price dynamics of the coin over the past five days.

bitcoin price chart

Looks like the value of the crypto has been sliding down over the last few days | Source: BTCUSD on TradingView
Featured image from Brent Jones on Unsplash.com, charts from TradingView.com, CryptoQuant.com



Credit : www.newsbtc.com

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